Weekly Market Outlook

Indian equity benchmarks ended the long week trade in red terrain as traders opted to book profit at all-time high levels as tensions in the Middle East and dimming rate cut hopes by the US Fed accentuated investors’ fears.

Key gauges started the week on an optimistic note as traders took support with a private report stating that India is expected to clock a GDP growth in the range of 6.9-7.2 per cent in the current financial year on the back of improving economic fundamentals.

Markets traded with traction even after Consumer Price Index (CPI)-based retail inflation rose to 5.69 per cent year-on-year (Y-o-Y) in December from 5.55 per cent in November. Meanwhile, the wholesale price index (WPI) surged to a nine-month high of 0.73 per cent in December 2023 as against 0.26 per cent in November 2023.

Besides, the index of industrial production (IIP) grew by a meagre 2.4 per cent in November compared to 11.7 per cent in October.

However, domestic indices took a U-turn and started moving southward as traders turned cautious with the commerce department stating that growing attacks on commercial shipping vessels travelling through the lower Red Sea have resulted in a combined impact of higher freight costs, insurance premiums and longer transit times.

Traders shrugged off reports that India’s trade deficit in December narrowed to a three-month low of $19.8 billion amid an import slowdown due to falling commodity prices. India’s merchandise exports registered marginal growth of 0.97 per cent to $38.45 billion in December 2023 as compared to $38.08 billion in December 2022.

Imports declined by 4.85 per cent to $58.25 billion in December 2023 as compared to $61.22 billion in December 2022 due to a dip in crude oil shipments.

Traders took note of the report that ratings agency Fitch has affirmed BBB- rating for India, with the outlook stated as stable. Hectic selling in banking in banking counter post-HDFC Bank’s Q3 numbers too aided the fall.

As per Crisil Ratings, the operating profits have likely expanded 100-150 basis points on-year in the three months ended December 2023, giving the corporates an overall operating margin of 19-20 per cent in the first nine months of 2023-24 fiscal.

But, selling on the final day of the week ensured that major indices went home with one and a half per cent cut amid a report that retail inflation for farm workers and rural labourers increased marginally to 7.71 per cent and 7.46 per cent in December compared to 7.37 per cent and 7.13 per cent, respectively, in November due to higher prices of certain food items.

BSE movement for the week

The Bombay Stock Exchange (BSE) Sensex slipped 1144.80 points or 1.58% to 71,423.65 during the week ended January 20, 2024.

The BSE Midcap index gained 505.55 points or 1.33% to 38,380.98 and the small-cap index gained 120.41 points or 0.27% to 44,624.11.

On the sectoral front, S&P BSE BANKEX was down by 1,565.33 points or 2.91% to 52,233.05, S&P BSE Finance was down by 274.51 points or 2.62% to 10,201.74, S&P BSE Realty was down by 155.89 points or 2.24% to 6,810.29 were the top losers, while S&P BSE PSU was up by 788.72 points or 4.94% to 16,756.76, S&P BSE Oil & Gas was up by 1,047.95 points or 4.33% to 25,273.35, S&P BSE Capital Goods was up by 885.13 points or 1.57% to 57,301.23 were the top gainers on the BSE.

NSE movement for the week

The Nifty slipped 322.75 points or 1.47% to 21,571.80.

On the National Stock Exchange (NSE), Bank Nifty was down by 1651.60 points or 3.46% to 46,058.20 and Nifty Next 50 was down 15.70 points or 0.03% to 54,727.20, while Nifty IT increased by 175.80 points or 0.48% to 36,697.50 and Nifty Mid Cap 100 increased 550.20 points or 1.16% to 48,062.80.

FII transactions during the week

Foreign Institutional Investors (FIIs) were net sellers in the equity segment in the week, with gross purchases of Rs 69,593.23 crore and gross sales of Rs 86,504.18 crore, leading to a net outflow of Rs 16,910.95 crore.

They also stood as net buyers in the debt segment with gross purchases of Rs 10,940.57 crore against gross sales of Rs 3,205.45 crore, resulting in a net inflow of Rs 7,735.12 crore.

In the hybrid segment, FIIs stood as net buyers, with gross purchases of Rs 366.13 crore and gross sales of Rs 269.51 crore, leading to a net inflow of Rs 96.62 crore.

Outlook for the coming week

In the passing week, Indian markets ended with hefty losses amid weak macroeconomic data. Inflation based on WPI surged to a nine-month high of 0.73 per cent in December 2023 as against 0.26 per cent in November 2023. 

In the coming holiday truncated week, Indian markets will remain closed on January 22 and January 26 on account of the Ram temple ceremony and Republic Day respectively.

The coming week is expected to be a volatile one for local equity markets on account of F&O expiry, which is scheduled to take place on January 25, 2024.

Investors for the coming week will be eyeing results from Coforge, Colgate-Palmolive (India), Axis Bank, Havells India, Mahanagar Gas, Pidilite Industries, Hitachi Energy India, Tata Elxsi, Bajaj Auto, Balkrishna Industries, Birlasoft, CEAT, DLF, Tata Steel, Tech Mahindra etc. among others.

Meanwhile, a crucial meeting on Central Know Your Customer (KYC) is scheduled for January 24, led by Finance Secretary TV Somanathan. The objective of this gathering is to discuss the effective use of the Central KYC Registry (CKYCR) for simplifying business processes and ensuring due diligence for customers.

On the global front from the US, traders will first be eyeing Redbook, Richmond Fed Manufacturing Index on January 23 followed by S&P Global Composite PMI, S&P Global Manufacturing PMI, and S&P Global Services PMI on January 24.

GDP Growth Rate, Chicago Fed National Activity Index, Goods Trade Balance, Initial Jobless Claims, Kansas Fed Composite Index, Kansas Fed Manufacturing Index, Building Permits Final on January 25, Core PCE Price Index, Personal Income, Personal Spending, Baker Hughes Oil Rig Count on January 26.

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